Effect of human capital development on the performance of small and medium scale enterprises in Nigeria

Abstract

In today's knowledge economy, firm performance and competitive advantage are derived more from what a firm knows and the human capital that permits the firm to use what it knows. Thus, human capital has been identified as one of the most critical agents of SMEs' performance, while human capital development has been recognised as one of the most vital tools for improving SMEs' performance. This study offers a field insight into the relationship between human capital development and SMEs' performance in Nigeria, through a survey of 80 randomly selected SMEs operating in Ibadan, south western Nigeria. A structured questionnaire was used to collect data from the study participants. Pearson Product Moment Correlation Coefficient and Multiple Regression Analysis were used to analyse the data. The result showed that human capital development variables have significant effect on SMEs performance. The coefficient of correlation (R) = 0.921; the coefficient of determination (R2) = 0.849; and the standard error estimate of 0.31254, indicated that 84.9% of the sampled SME's performance can be associated with the promotion of on-the-job training; level of formal education; level of participation in seminars, conferences and workshops, and level of participation in trade fairs and exhibitions,as strategies of human capital development for the SMEs' employees. The paper therefore recommends that SME operators should actively promote participation in seminars, trade fairs, workshops and exhibitions in order to acquire current knowledge that will positively impact on the performance of the SMEs and enhance their capacity for growth and survival.